Bundling equilibrium in combinatorial auctions

This paper analyzes ex post equilibria in the VCG combinatorial auctions. If Σ is a family of bundles of goods, the organizer may restrict the bundles on which the participants submit bids, and the bundles allocated to them, to be in Σ .T heΣ -VCG combinatorial auctions obtained in this way are known to be truth-telling mechanisms. In contrast, this paper deals with non-restricted VCG auctions, in which the buyers choose strategies that involve bidding only on bundles in Σ , and these strategies form an equilibrium. We fully characterize those Σ that induce an equilibrium in every VCG auction, and we refer to the associated equilibrium as a bundling equilibrium. The main motivation for studying all these equilibria, and not just the domination equilibrium, is that they afford a reduction of the communication complexity. We analyze the tradeoff between communication complexity and economic efficiency of bundling equilibrium.

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